The impatriate tax regime
The impatriate tax regime was amended with effect from 1 January 2025.
The mechanism is now largely flat-rate, replacing an approach based on reimbursing certain costs with a 50% exemption on eligible remuneration.
The regime targets employees recruited from abroad or seconded from abroad, subject to strict conditions.
In practice, the main points to secure relate to the remuneration included in the calculation, the duration of the benefit, and the eligibility criteria (prior residence, location, and the proportion of working time performed in the jurisdiction).
1. Core rule: a 50% flat-rate exemption
The heart of the new policy is a flat tax exemption.
From tax year 2025, 50% of the eligible gross annual remuneration can be exempt from income tax, up to a remuneration base of EUR 400,000 per year.
This implies a maximum income-tax exemption of EUR 200,000 per tax year.
The exemption applies to income tax only and does not extend to social security contributions.
2. Duration
The regime applies for the duration of the assignment, with a limit: no later than the end of the eighth tax year following the tax year in which employment on the territory begins.
This wording helps avoid common ambiguities between “8 years”, “8 years following arrival”, and “8 years following the first full year”.
3. Scope and typical scenarios
In general, the regime covers employees recruited from abroad or seconded from abroad who become tax residents in the jurisdiction in connection with the employment.
The most common scenarios are intra-group mobility (secondment) and the direct recruitment of a specialised profile from abroad.
4. Eligibility conditions to secure
The conditions are cumulative and should be well documented.
4.1. Conditions linked to the employee’s prior situation
During the five years preceding the start of employment, the individual must not have been a tax resident on the territory, must not have carried out a professional activity on the territory, and must not have lived within 150 km of the border.
4.2. Conditions linked to the employment performed
At least 75% of working time must be performed in Luxembourg.
A minimum base annual salary of EUR 75,000 (excluding benefits) is also a condition for access to the regime.
Finally, the hire should not aim to replace a local employee already performing the role.
4.3. Conditions linked to qualification level and the 30% cap
Experience or specialisation requirements apply, with a different approach depending on whether the situation involves an intra-group secondment or a direct recruitment.
The concept of a “highly strategic sector” is not precisely defined by law, which calls for a cautious, fact-based justification.
In principle, the number of impatriates cannot exceed 30% of the local workforce, subject to exceptions.¹
Example:
An employee with eligible gross annual remuneration of EUR 300,000 may benefit from an income-tax exemption on EUR 150,000 (50%). If eligible remuneration reaches EUR 500,000, the exemption applies only up to the maximum base of EUR 400,000, i.e., a maximum exemption of EUR 200,000.
5. Transitional regime and access procedure
Employees already covered by the former regime before 1 January 2025 may, in principle, continue under the former regime as long as its conditions remain satisfied, or opt into the regime applicable from 2025.
The annual nominative list of beneficiaries (and, where relevant, the indication of regime transitions) must be filed by the employer with the Direct Tax Administration (ACD) no later than 1 March of the year following the year the employment started.²
1. This condition does not apply to companies less than 10 years old. The regime may also be accepted for companies established on the territory with only one employee.
2. Under the law of 19 December 2025, applicable from tax year 2025.
